Gas price relief may be short lived as Sask. drivers face uncertain fall

For Saskatchewan drivers, the price at the pump can feel like a moving target.

One day there’s a little relief at the gas station. The next, there’s another reason to brace for a jump. And with fall around the corner, the question isn’t just what drivers are paying today – it’s what that number could look like tomorrow.

Read more:

• Saskatchewan gas prices drop as much as 20 cents a litre, but analyst warns relief could be brief
• Saskatchewan drivers feeling the sting of surging gas prices
• Ford calls on Carney to extend gas tax cut or make it permanent

Roger McKnight, chief petroleum analyst at EN Pro International, joined The Evan Bray Show on Monday to discuss the uncertainty around gas prices and the possibility of a rebound this fall.

Listen to the full interview or read the transcript below:

This interview has been edited for length and clarity.

EVAN BRAY: We’re seeing a recent drop in gas prices around Saskatchewan. Is this similar across Canada?

ROGER MCKNIGHT: It’s a bouncing ball. It really depends on whatever President Trump wants to project as the foreseeable future in his mind. But it is quite a mess, and I really empathize with the consumer and I empathize with other analysts trying to figure this out too, because he’s completely unpredictable. But the price drop we saw was a huge one earlier this week because of his feeling that a deal was coming through with the Strait of Hormuz. So when I look at the futures prices, as we speak we’re seeing another large jump in gas and diesel prices and crude prices, probably on the day after tomorrow, so it’s all over the place.

How much impact do we see with oil and gas prices to the actual war versus the impact on statements that are made and perceptions that are left after those?

MCKNIGHT: I call it the fog of delusion, because whenever a statement comes out from the White House, the traders, insurers and shippers involved in the Strait of Hormuz are really just as confused as everybody else, because any notification that says “Oh yeah, the strait is going to be open,” will drop the prices. If it’s “Well, I changed my mind. The strait is going to close,” the prices go back up. So if you’re a shipper and you’ve got the two million barrels of crude oil waiting to get out of the Strait of Hormuz, and you’re not sure it’s going to get anywhere, it’s a matter of uncertainty. Markets, insurers and investors don’t like uncertainty, and they’re stuck in that right now. And that’s why we’re seeing price jumps all over the place, based on rumour rather than fact.

You’ve given us a pretty good picture of why you could have a gas station two blocks away from another one with different prices. But what about the difference between gas and diesel?

MCKNIGHT: I just checked the numbers, and the national average for retail diesel is $2.20. The national average for gasoline is $1.70. That’s 50 cents a litre difference. I can only do it on a national basis – I can’t do it individually – but that’s a big problem. Everybody looks at the flower child, which is gasoline, but the workhorse is diesel, and the diesel inventories are are desperately low right now. And we’re coming into the fall season. We’re coming into the maintenance period. Refineries are running at 96 per cent. They can’t afford to shut down, because their profit levels are so high. But if they don’t get into maintenance or go into regular maintenance in September, then there’s going to be a real problem when you get into the late fall.

Is there such a thing as a seasonal change in impact across Canada? What are the regional differences?

MCKNIGHT: there is a seasonal change, because the refineries go into seasonal maintenance, and in February they shut down to get ready for the high-demand gasoline season, which theoretically starts at the end of May, and then in the fall, they get ready. They go into maintenance to increase the production of metal distillates, which is basically diesel furnace oil and jet fuel. So yes, there is a seasonality to it, and really that seasonality, as far as price is concerned, is a matter of inventories. How much inventory have we got? Well, the Strategic Petroleum Reserve, which is sort of the bank that everybody goes to get a crude oil loan, is sitting at 42 per cent capacity. That’s almost empty, for goodness’ sake. Your dissolved inventories in the States are 12 per cent below the five-year average, and your refineries are running at 96 per cent. So the refineries, if they go down and your inventories are down, then the prices can only go up.